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What is Tax Court?

By Christy Bieber
Updated May 17, 2024
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Tax court is a court of limited jurisdiction in which all tax matters are heard. Taxes are money assessed by the government on citizens to pay for public services such as police, fire protection, social welfare programs, wars and other necessities of running a government. If a person does not pay his taxes or if there is a dispute related to tax obligations, these issues are heard in a tax court.

In the United States, taxes are assessed on several levels. Federal taxes are charged by the federal government on every person's income. State taxes are also charged, as are property taxes, sales taxes, and sometimes local taxes. Federal tax issues are heard in United States federal tax courts, while state tax cases can be heard in state courts.

Penalties for failure to pay taxes can be severe within the United States. Interest and fines are common for late payments or back taxes. Jail time may also be an appropriate penalty for an individual who is willfully hiding income and assets to avoid paying taxes.

When a person does not pay his taxes, or pays insufficient taxes, the Internal Revenue Service (IRS) in the United States is responsible for enforcing the tax code and tax laws. The IRS also audits people periodically, randomly checking the tax filings to ensure compliance with tax laws and codes. If a person fails in paying taxes and the IRS believes he is not living up to his obligations under the law, the IRS can either fine the person and force him to pay or can take him to tax court if necessary to determine what the appropriate penalties are.

In tax court, the judge can garnish a person's wages — which means the judge can order that money be withheld directly from a person's paycheck and paid to the IRS. The tax court judge can also seize assets and/or force the sale of assets to satisfy an outstanding tax obligation. The individual who has been accused of non-payment or underpayment can also mount a defense in tax court, providing evidence that he either paid his taxes or that he did not have an obligation to pay under the laws of the tax code.

Different tax enforcement agencies exist in different countries. However, nearly every country, including the United Kingdom and countries within the European Union, assess taxes on their citizens and have tax courts for those citizens who do not pay. Penalties, types and amounts of taxes and the function of tax courts differ slightly within these countries, but in every case, the general purpose of a tax court is to enforce and apply tax laws.

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